UNCERTAINTY OVER BRICS CURRENCY IMPACT

MBABANE - Economist Thembinkosi Dube says it is hard to predict what will happen to Lilangeni considering the fact that it is linked to the South African (SA) Rand in terms of currency value.

“This is a political and financial matter and my prediction is that we will follow suit as a country but all we can do is wait and see,” said Dube. Dube was responding to questions from this publication on what might be expected to happen in the Lilangeni as it is pegged to the Rand. SA officials have said that the creation of a BRICS currency was one of the main topics up for discussion when the group of five emerging nations - Brazil, Russia, India, China and SA meet in Johannesburg in August. The aim of this proposed development is to facilitate trade and investment among the BRICS countries while providing a more stable and secure currency for international transactions. This means these countries will stop trading using the Dollar. In his response, the economist mentioned that this move would destabilise the dollar, as these power houses would stop using it to trade and that would leave Eswatini in the deep end. BRICS is an acronym for Brazil, Russia, India, China, and SA. Goldman Sachs economist Jim O’Neill coined the term BRIC (without SA) in 2001, claiming that by 2050 the four BRICS economies would come to dominate the global economy. SA was added to BRICS in 2010.

Renegotiate

Meanwhile, Economist Sanele Sibiya said the proposed BRICS currency would require countries like Eswatini, SA, Namibia and Lesotho to renegotiate their arrangement in the common monetary area as their currencies are linked to the Rand. Sibiya said if South Africa decide to accept the new arrangement, Eswatini would be affected in a way that it would need to accept the new currency as a new legal tender. The economist said, however, the beauty would be that if the country took up that currency that is backed by the production in the BRICS countries “it would reduce the volatility of the rand and give a much better currency,” he said.  

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